Essay: Enactment of SOX

The Sarbanes Oxley act is a notable act to revive the investors’ confidence and activity in the US capital market. This acts incorporates certain standards that are considered to be strict and he guidelines of this act depicts that the audit of financial statements would be strict and would properly fulfill the disclosure requirements of the financial statements. Earlier frauds were taking place and financial statements were not properly disclosed.

This demand for truthfulness and certainty in the financial statements has scrutinized the role of auditors and the recognition of fraud and malfunctioning in today’s world in not an easy job. Another important element was argued that public auditing firms are restricted in their ability to generate sufficient revenues to satisfy their operations and staff requirements. Different implications of SOX are discussed and the broader impacts of SOX on various stakeholders are also discussed in detail. The literature by Baker (2008)and DeFond & Francis (2005) covering the enactment of SOX and its implications suggests that the law may result in serious unintended harmful consequences.

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